MUMBAI: The budget will have no impact on the sovereign credit rating on India, ratings agency Standard & Poor's (S&P) has said.

"Further developments in India's economic growth prospects, its external position, fiscal reforms (including subsidies and GST), and political climate will determine the medium-term trajectory of the sovereign ratings on India," it said.

The fiscal deficit target of 4.8% for 2013-14 is in line with the country's medium-term fiscal consolidation plan recommended by the 13th Finance Commission, S&P said.

"The improvement in the current year's deficit outcome has been achieved mainly through reducing expenditure. At the same time, there is little progress in structural reforms to reduce the vulnerability of the government's fiscal position," it said.

Though the government allowed a gradual increase in diesel prices earlier this year, the timing and the extent of such increases are uncertain making the country vulnerable to spikes in oil and other commodity prices, S&P said.

If the government enacts the Food Security Bill, the fiscal burden would only increase. "As a result, the total cost of subsidies may exceed the government's budgeted 2% of GDP in 2013-2014, compared with 2.6% in the current year," the ratings agency said.

Despite the weak economic environment and the political temptation to increase fiscal expenditure ahead of a general election, the government has presented a 'relatively prudent budget', S&P said.

Fiscal consolidation in the next financial year would be mainly through steps to boost revenues, some of which are temporary. "Expenditure growth will still accelerate to 16.4%, from 9.7% in the current year," the ratings agency said.

"The budget would be vulnerable to economic conditions in the next fiscal year," it said.